How To Prevent Tenants From Abusing The Lease With Multiple Long Term Guests

When you book a hotel reservation the representative will ask for single, double, or multiple occupancy and charge accordingly. It’s the same idea when you rent out your property to prospective tenants. Those who plan to rent your property are written in the lease predominantly for legal purposes. Those who plan to stay in your property who are not on the lease are considered guests.

Sometimes your tenants will abuse the lease by having multiple guests stay for long durations of time. Of course having the girlfriend stay over for a couple nights a week or the parents visit for a couple weeks at a time is fine. However, where does one draw the line? Although restricting guests and their duration of stay is almost impossible to enforce, there has to be some language and understanding in the lease to prevent a rental from turning into a boarding house.

During my latest tenant search, I almost accepted two guys who would have fully taken advantage of the lease by having two to four guests all throughout the year. Here’s how things played out.

PREVENTING GUESTS FROM OVERSTAYING THEIR WELCOME

My main rental is a two bedroom, two bathroom condo with parking in a nice part of town. I decided to raise the asking price by 12% to take advantage of current tightness in the market. The realistic range I could charge was between $3,500 to $3,800 based on my market research and I decided to shoot for the top.

Demand was strong at $3,800 but several prospects who showed tremendous interest flaked out in the end. Then a software engineer who just relocated to Google’s San Francisco campus from Mountain View paid me a visit. He was a nice guy who made a low six figure income. His roommate would be arriving later next month from Bangalore, India for an internal job transfer at Google on an L1 visa.

Before I Skyped with the prospective tenant from Bangalore, his roommate was so eager to secure my place that he offered to come by my house that evening and leave the $6,000 rental deposit with me. I agreed and told him I would not cash his deposit until the interview was complete and we all signed the lease. During the tail end of his visit, he mentioned that his father would be paying him a visit next month for a couple weeks. Not a problem.

Then I politely asked what about his mother, afraid that he might say they were divorced or worse, deceased. He responded, “My mother is coming too, and will stay with me for one month. Is that OK?”

I was surprised by the duration of her stay and asked him, “Where would she stay?” given he would have a roommate.

He politely responded, “In my room, with me.”

I realize it’s common for 20-something year olds to co-habitate with their parents until they build up their financial reserves, but I have never heard of living in the same room with your mother for a month if you are making a six figure income. Why not just put your parents up in an inexpensive motel? Besides, my apartment isn’t big enough for four adults.

My prospective tenant is either a big time mama’s boy, which may be good because when mama is home there won’t be raging parties that will disturb the neighbors. Or, my prospective tenant might be uncertain about his financial situation or is super frugal. He asked me if I could put in a clause that said I would not raise the rent for two years for example. If you’re constantly going to have your parents stay over, at least get your own place or a place with one extra bedroom. Don’t parents deserve better?

As a grown adult I’m not sure if I could voluntarily live in the same room with either parent for one week, let alone a month. Could you? I chalked the situation up to cultural differences. My tenant then mentioned that he’d probably have his five brothers and sisters visit as well from India. One big happy family.

The Roommate

My Skype with the roommate transferring from Bangalore went OK. He was much more aggressive and abrasive as a 25 year old. When landlords think of two fellas in their mid-20s as tenants, we can’t help but think of party animals who disturb the peace. Fortunately, these prospective tenants did not seem the party type as both went to IIT Delhi, the best university in India with less than a 2% acceptance rate.

At the end of the Skype session, the prospective tenant also mentioned that his parents and siblings would be visiting from India as they’ve never seen America. His L1 Visa expires after three years and he wants to maximize his stay as he should. Understandable, but where would they stay and for how long I asked?

“With me, in my room of course!” he retorted in a very annoyed tone as if he owned my place.

If there’s one thing I really dislike, it’s cocky recent college graduates who thinks the world owes them something without paying their dues. I’m very big into respect for your elders, and this kid showed none.

Now I’m doing the math. Rent to two guys who have an immediate family totaling around 15 people who all want to come visit for who knows how long. My fellow owners are going to go nuts.

ADD A GUEST CLAUSE IN THE LEASE

I’ve never had a tenant in the past 10 years who invited family to stay with them for more than two weeks at a time let alone a month for multiple times a year. Furthermore, I’ve never had a tenant who were not “one unit” – either a couple or a single individual. As a result, I never had any sort of guest clause because I naively assumed everybody wants to live by themselves.

The prospective tenants were nice enough to at least tell me their parents planned to visit for a while each this year. Some tenants simply roll in extra beds for guests who are not on the lease and squat for months or even years. Once you have a tenant that you want out for whatever lease violation, it is very difficult to evict. The process takes at least six months to move to court proceedings after a notice of eviction is served. In those six months, the tenant can very easily stop paying the rent.

Given I didn’t want potentially six people living in my unit at a time throughout the entire lease, I added an important guest clause which stated that tenants are allowed guests for up to 30 days a year. The days can be used consecutively or distributed throughout the year. I decided on 30 days because that was the duration the first tenant said his mother would stay. Hence, I was trying to be accommodative to his wishes.

The rule is not strictly enforceable by me, nor by San Francisco ordinance, but at least I have some line in the sand I can point to and we can agree upon.

It turns out that both tenants balked at any sort of guest clause. They could not understand why their parents, brothers, and sisters coming to visit for months at a time would not be ideal. Even after giving them the single/double occupancy hotel room booking example and explaining liability risk as my biggest concern, they still didn’t get it. I wrote:

Hi Guys, I’m sure all your family members are great, but please understand I have landlord insurance I pay every month for liability reasons. Here are some examples of things that may occur which are out of our hands.

* Mom stays for two months and hurts herself walking down the steps. Mom decides to sue me or the association because of some crack on the steps we are not aware of.

* Dad accidentally leaves the stove on and burns down the kitchen while you guys are away at work. Your rental insurance policy should pay, but who knows? I’m sure I will have to get my insurance involved and the process will be one long nightmare.

* Brother has some altercation with other owners due to excessive noise. They file a complaint and penalize me for him not being on the lease. What an embarrassment and hassle for me during the next HOA meeting.

* Your mom leaves the condo door or garage door open and there is a robbery of someone else’s unit. Although you say you are responsible, the HOA will go after me, and I will then have to make sure you cover the damages.

Hopefully these examples highlight my reservations for multiple long term guests.

Thankfully, the tenants rejected the lease as they refused to have any guest restriction clauses in the lease. The tenant already in SF later admitted to me that he wanted his mother to stay for 6 months at a time, and not just one month. Every single landlord I spoke to has a guest restriction clause with durations ranging from two nights a week to five weeks a year total. Although I’ve now got to look for more tenants, I feel better knowing that my apartment won’t be turning into a boarding house for a couple dozen people throughout the year.

THE INTERVIEW IS KEY

Every city has different rental rules to be aware of. San Francisco is known for being very pro tenant given the limited supply and relatively high rents. I’ve heard of many nightmare scenarios where tenants demand X amount of money to move, or who simply squatted without paying rent for months because of some conflict.

Ideally, you want a tenant who takes care of your place, pays on time every month, treats their neighbors with respect, and leaves you alone. In order to find the ideal tenant you’ve got to carefully look over their financials, ask about their work, understand their current living situation, and figure out what makes them tick.

The interview is vital to getting to know them better. Sometimes, there are simply cultural differences which cannot be overcome. Other times, there might be stability issues between the couple or job risks if a prospective tenant works at a company you know is going under.

It is always better to be safe than sorry. Understand your cities’ rental laws, include points in the lease which concern you, and carefully screen tenants who you think will be the best tenants for your place. You’ll be able to lower turnover and increase your happiness in the process.

TO REVIEW: HOW TO MINIMIZE TENANT LEASE ABUSE

1) Stick with the 40X monthly rent as annual income or greater rule to reduce the chance of having tenants wanting to sublet, AirBnB, or secretively find additional tenants not on the least to share rent expenses. We’ve probably all secretly piled into hotel rooms before to save on costs. As a landlord, you have liability risk that could cause big time damage to your finances. Get as many long term guests to sign your lease as possible.

2) Get landlord insurance as well as an umbrella policy to protect your assets. Here’s how an umbrella policy works. This article discusses how much property insurance you should get. Paying the full rent on time becomes a secondary matter if you have assets to protect. The number one thing you should be concerned with is liability because uncontrollable bad things happen all the time.

3) Spend time interviewing your tenant over e-mail, telephone, Skype, and face-to-face. Observe their promptness of response and their courteousness. By asking basic questions about their employment, their desired length of stay, and interests, you should be able to get a good idea of whether they will respect your lease or abuse it like a broken soda machine.

4) Add a guest clause if you have concerns. Make sure you go over every single point of the lease together so there is no ambiguity. It’s all about setting expectations early on. Only when my prospective tenant was giving me the deposit check did he ask about his mother staying for a month. And only after I put in the 30 day guest clause to allow for his mother to stay for a month did he admit that his mother was planning on staying for 6 months. At the end of the day, it is your apartment and you and the HOA decide the rules. If a non-negotiable rule such as quiet time after 10pm ruffles their feathers, then move on. Any tenant who shows annoyance or questions basic rules will probably want to bend them.

5) Get the rental deposit of 1.5 months worth of rent or more and explain its use. With a hefty deposit, a tenant should be more likely to comply with the rules, cause less trouble and damage, and clean up the place upon exit.

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I’ve just never heard of a grown adult son sleep with his mother on the same bed or stay in the same room for months. More power to them if they want to save money, but then I wonder whether they’ll have six people live in my living room as well.

Good to know about the tourist visa issue. I didn’t realize this and something to take into consideration.

I’m not sure how these two prospective male students several years out of undergrad could have a baby, unless they adopted. Too early in their careers I would think, especially with one guy just coming to America. But, maybe!

Sometimes , a grown adult son sleeps with his mother in the same room for reasons other than money.Sometimes we dont need “our space” or “our privacy”.I admit some people do take advantage of the laws in America, but most Indians i know try to do the best with what they can.

And yes , I am an Indian living in the US of A.I have lived with my parents in a 1 BHK, for a month . Not everyone wants to put their parents in a motel or live far way from them.

True. And this is the power of choice. Landlords have a choice to choose the best tenants, just like tenants have a choice to live with their parents. I’m just curious why they wouldn’t just get a 3 bedroom then and give the parents the “luxury” of having their own room? Seems to make sense no?

Its definitely a cultural thing. I grew up in Mumbai where 6 of us lived in a 1 bedroom apt, where it was common to have 10 people living in a studio! Only the “wealthy” in Mumbai could afford a 2 bed or more. Plus we used to have guests over all the time. Western concept of personal space is a recent phenomenon in India. I have definitely seen a shift from studio/1bed to 2-4 bed condos in Mumbai in the last 2 decades. And it is not always about money. I used rent a 1 bed apt with my wife and my parents used to visit me all the time and used to stay for the entire summer. Initially when I came to know about the restrictions i thought it was strange. My apt complex used to charge $50 pp/month which I paid. Could I afford renting another apt for them? Sure… But it would have devastated my parents! There are a few reasons for that.
1) They would feel that they were not welcome to my house.
2) It would be a big deal in India if their relatives/friends found out that they did not live in the same apartment
3) They cannot drive and so are dependent on you to move around
4) They would get bored and feel lonely.
And whats the point in renting a 3 bed apt for that 3 month trip from parents that will happen once in 3 years, when its not even a big deal. You would probably get a lecture from your parents for wasting money in renting, when you could have saved that money for down payment!
I have taken my parents to real expensive vacations to Hawaii and around Carribean and we lived in the same room. I just pay the extra charge that the hotel charges.
When we bought our first home (a 6 bed cookie cutter Mcmansion ;)) the space was so much that it took us almost a year to get used to the space. We used to spend most of our time in the granny unit of the house! As I am writing this I have a cousin visiting me from India for 4 weeks vacation. He has older kids (18 and 15) and all four of them are staying in the granny unit even though I offered them individual rooms. So its not always about the money.

Nice job going from a 1 bedroom apartment for six to a 6 bedroom mansion! With this type of progress, is it safe to say all your relatives in Mumbai also want to move to America? What is it that you do and where are you located?

For the record, if I had a 6 bedroom house I wouldn’t mind having guests over for a while.

I also live in the bay area (Fremont). Actually, we started off in the slums (think slum dog) in a 250 sq ft shack. My parents worked very hard for me and 2 of my younger brothers. They got us out of the slums when I was around 12 (and almost got into a gang) in a 1 bed 450 sq. ft. working class neighborhood. With no particular talent, excelling in studies was the only option for us to get out.. Went to IIT and then to Berkeley. My brothers too followed me. While all three of us did quite well, my 2nd brother is doing really well. He launched and sold multiple start ups and is a multi millionaire living in Los Altos. So all of our relatives want to send their kids to IIT ( and eventually to USA). Things have definitely changed for the better in Mumbai. While there is still abject poverty and is quite visible, its nothing compared to what I saw in the 70s and the 80s. The slum that I grew up is gone and there is a swanky mall in its place. While US is still aspired by the majority, the craze has definitely died down because of the recession. Because of all the opportunities some of my classmates have moved back with hefty pay packages.

Sounds good Sunil. Did you get a chance to read my article on Why Are Asians Ignored By The Media? It seems obvious to me that work ethic and education plays a HUGE factor to doing well in life. Hence, why do you think more people in America don’t take advantage and crush it in school if they want to do well at least financially?

We have guest clauses similar to the one you ended up using in our rental unit contracts, and they seem to be pretty standard down here. (The clauses were in our contracts when we rented, at least.)
For us, when tenants ask about them (if they do), we explain it in terms of wear and tear on the building, appliances, and septic system. A septic system built for the water usage of 4-5 people is going to be stressed out and cause problems if it’s consistently being used at twice its capacity. Overnight bf/gfs a couple times a week aren’t usually a problem since they usually do their own laundry, showers, etc elsewhere.
Even if the place isn’t on septic, we had a girl that started babysitting in our place and we released them from the lease early. Having 3 kids in the house every afternoon was not a liability we wanted, and they broke some of the blinds. Yes, it’s kindof normal wear and tear, but the more people you have the more of it there’s going to be, so I don’t see a problem with being upfront with tenants about your expectations on guests.

Many years ago, my husband and I had a basement apartment in our house that we rented to a brother and sister. I thought that it was a pretty small space for 2 people – probably less than 500 square feet in total. One weekend I knew that they had guests over but was shocked when there was no hot water to be had. We knocked on their door and found that there were 9 people staying in the apartment over the weekend. I have no idea where they all slept – it must have been body to body on the floor. Yes, we all have different ideas about personal space but this was a bit much!
I think you dodged a bullet with this one because you avoided a lot more wear and tear on your apartment than necessary.

Well I love curry but I sure wouldn’t want that many people living in my house! I have a question for you…we’re thinking of buying another home and leasing our current house. It has a swimming pool. Is that a huge liability? Is it dangerous to rent a house out with a pool?

What you have described is par for Asian cultures. Most professionally done leases here in SG will cover this situation, but of course it is up to the landlord to enforce.

And the curry smell thing is big. Many landlords here will tell their agents not to rent to certain nationalities/races due to this very issue, even if they pay higher rents.

My tenant is from India too, and has his parents with him, even though the initial lease signed only includes him, wife and daughter. However my rental is set up for big families, and his company is paying me 25% above market rates, so I close both eyes. Besides, they are extremely neat and clean, and keeps my place in tip top shape, so I want them around forever. And no curry smells! I hadn’t quite thought about it in terms of liability insurance though, so I probably need to check how having 2 extra people long term in the house affects that.

My lease is signed with my tenant’s company directly. I have no idea why they didn’t do their market research. I think their HR had other things to do, so they just relied on their agent, and well, higher rent = higher commission. Whatever, I have the highest rent among all the rental units in my condo development, so I’m not going to complain. I just hope that whoever who deals with leases in the company continue to be oblivious.

Parents living with them for six month, siblings for months at a time? Do these people work or are they all just living off the one person who signed the lease? I envision their parents are not likely retired yet, so I find it odd that they can afford to take so much time away from work and their home unless they’re planning to move. With respect to siblings I would wonder about schooling and work as well.

Oh wow I think you got lucky finding out their intentions in the application process before signing anything. I am impressed that those guys could live with their parents in the same room for so long! I’d start going crazy in a few days lol. I need a lot of privacy and space to keep my sanity.

Agreed. It is every landlord’s responsibility to weed out prospective tenants who might abuse the lease. Smart is different from being taken advantage of.

Not sure why you being up curry as there’s no mention of food smell in this article. Are you confusing the commenters comments with my article that focuses on liability, wear and tear, and guest guidelines?

Yep, Vanguard REIT; over 17% average annual return (admiral shares), fee adjusted, for the past 3 years. No landlord headaches. I look at investing in rental properties and can’t make the numbers beat this overall. Please someone do a full comparison to prove me wrong.

Sure, for example SF property is up over 10% this year eg $700,000 to $770,000. That’s a 50% gain on a $140,000 capital outlay. Meanwhile, if it’s a rental, someone is paying down the principal every month.

Doesn’t the 6% RE fee hit your theoretical 50% gain at purchase and sale (twice)? Then there is the prop tax, HOA fees, vacancy rate factor, etc. Your posts are typically very detailed with pros and cons. This would be a compelling future blog post, don’t you think?

No. The 5% commission is only paid upon sale. I can cherry pick any property sale to beat stocks as you have cherry picked your REIT’s 17% gain. It’s kinda a useless exercise as all real estate is local. What is the dollar value that you made on your REIT BTW?

Ok, so 50%-5%=45%…sounds great! With RE looking so good in SF, why not cash out your CDs and go all in? FYI, I have about 300K in REITs…but I’m honest to say I made nothing…until I SELL. Just like your rental it’s a estimated gain until I liquidate. But REITs are very liquid compared to RE. A REIT can cash out anytime at a keystroke.

Because nothing is a guarantee. I also like to earn money doing absolutely nothing risk free. But,
i did accumulste another property over the past 5 years. What is 300k as a percent of net worth to get some perspective?

Yes , they are trying to take advantage. Many Indians do . All human races are the same , with their share of rotten apples. Oh, and there are cleaning and vaccuming services that can eliminate the smell of curry shortly after they clean it. I assume the landlords levy a deposit which is large enough to cover all these.

Indians are not perfect and have many issues. But they are no better or no worse than any Anglo-Saxon,Hispanic ,Black ,Jewish ,Chinese or any other race on this planet.

And not every Indian takes in their friends , relatives and colleagues. Please don’t generalise based on your experience. Will it be right if I say if more than 75% of American couples get divorced ,more than 50% of teen girls get pregnant while in high school.college , 25% of teen boys are drug addicts/heavy drinkers and all of them belong to a particular race?

They couldn’t understand the liability issues even after verbally and through e-mail explaining the situation. I wasn’t concerned about them paying their rent given their multiple six figure combined income. I was concerned about security and conflict with the neighbors.

I had a “boyfriend” move in and destroyed the apartment. In addition, I evicted them and they filed bankruptcy. The process took 9 months. The good news was this occurred in a $425 per month apartment and it was only one of 24 units. It could happen to you and it would be devastating! After that, no guests could stay longer than 2 weeks.

This is great to understand from the renter perspective. I remember when I got my first apartment, I didn’t understand all the vetting. But I guess it’s really tough to find good tenants. This is going to be really valuable info for when I eventually do invest in rental real estate. Great post!

One upside not mentioned, is it protects the other roommate. Seems like these guys had a plan, but it doesn’t take much for roomies to get on each others’ nerves. There has to be a ‘tipping point’ where one more long-term guest would break the camel’s back. For these single guys from India, an arranged marriage is often in the cards so they can have a progeny born on U.S. soil (and therefore automatic citizenship). That can get interesting for newlyweds in a crowded domicile.

One of the funnest times in my life was living in an awesome house near the beach with three other single guys. I was there four years, and the house went on for eight with 10 different roomates. Sooner or later, each guy would have a g/f stay over just a leeeeeeetle bit too often, and it was right in the lease; one guy used the circumstance to break up with his fiancée. She quit her job, wanted to move in or have him move out with her (and foot the entire rent, etc.). He took a look at what the next 50 years of fresh hell his life would be with this parasite, and decided to wait for a woman who was pretty, kind, and employed.

Let me just say this, my brother married into an Indian family and they all travel together all the time. They have no problem sharing the same room – it’s one, big happy family. My brother (blond-haired, green-eyed American) assimilated into their culture (I don’t think he had a choice) and has no problem sharing facilities with his in-laws. However, in the case of renting, I think you made a good choice by adding that clause into the lease if you weren’t comfortable with 5+ people staying in your 2-bedroom condo.

most real estate agents ask you no to share the house. i wasn’t allowed to rent out the 2nd bedroom. i did anyway and htey still don’t know. it’s been 3 years .my gf is saving a lot .the rent is $150 pw and she’s paying all of it .i’m saving a lot too.

You forgot one key point, and this maybe the most important thing? If you do a credit check and or backround check on a prospective tennent then he invites his mother, father, and brothers, sisters, and cousins to live with him one of his many “guests” could be a rapist, pedophile, drug addict or drug dealer. You wouldnt have had the oportunity to do any backround or credit checks on his “guests” now would you?

People in the comments section are complaining about the smell curray….well what if one of the brothers or cousins started cooking meth?

What if one of the brothers or the father or the cousins had a huge crimal record involving multipul rapes or pedophila?

If they hadnt told you their plans and you hadent found out that all these people were in your house until well after they had stayed long enough to legally be considered residents what would you have done?

What a potential nightmare!!!

I definatly will be putting a no overnight guest policy in the lease if I ever rent out property!!!

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